When Trevor MacDermid received an e-mail message from the Metropolitan Transportation Authority with the subject line “copyright infringement,” he thought it was a reprimand—and it was. But it also offered him a business opportunity.

In early 2010, when he got the e-mail from the MTA, the owner of Underground Signs had been quietly producing and selling replicas of old New York City subway signs for about two months.

“Part of what was implicit in Underground Signs is that I was doing it off the radar,” Mr. MacDermid recalled.

Not off the MTA's radar, it turned out. The agency's e-mail informed Mr. MacDermid that he was violating the MTA's copyright, but then went on to invite him to discuss a legitimate licensing deal.

The result: Mr. MacDermid now holds an exclusive license to create and market reproductions of New York subway signs, ranging from top sellers like “161 Street-Yankee Stadium Station” to custom signs with businesses' names. In December of last year, Mr. MacDermid signed a deal with the Massachusetts Bay Transportation Authority to create a similar line of transit signs, inspired by the Boston T.

Extending invitations to discuss licensing deals might seem like extraordinarily civil behavior from the people who bring you the C train. In fact, the MTA makes similar offers to about 50% of the entrepreneurs caught violating its copyright, said Mark Heavey, the MTA's chief of marketing and advertising; roughly 10% actually secure a deal.

Because the subway is an integral part of New York's history and psyche, Mr. Heavey explained, it's understandable if people think that symbols like the bright-red “1” or the apple-green “G” are public property.

AGENCY DOESN'T PLAY THE HEAVY

“We don't want to be the bad guys,” Mr. Heavey said. “We have to assume that people don't realize these are protected marks.”

More than 90 entrepreneurs have licensing contracts with the MTA. They sell everything from cuff links made from old subway tokens to MetroCard mouse pads, and hand over a portion of their sales to the MTA, usually 10%.

The deals allow small enterprises to capitalize on trademarks that are sought after by tourists and New Yorkers alike. Meanwhile, the transit agency reaps more than $3 million in annual revenues.

Lynne Lambert began marketing her subway-themed apparel—R-train baseball caps, subway-map hoodies—in 1996. Her business, NYC Subway Line, initially met with skepticism.

“Only a handful of retailers really got it,” she said. “What we were hearing was: 'The subway? Why would I want to wear that? It's dirty, stinky, dangerous and horrible!' ”

But as the transit system cleaned up its act, people became more inclined to become walking advertisements for the A train. Ms. Lambert's business topped the $1 million mark in 2008. Sales have dipped since the recession, however.

Of course, bagging a licensing deal is no guarantee of success, or even a spot in the New York Transit Museum gift shop.

“Entrepreneurs must do some solid projections of what they can sell and how much of this stuff the mar-ketplace really wants,” said attorney Barry Werbin, chair of Herrick Feinstein's intellectual property and technology group.

If they aren't prepared, the results could be devastating, because licensees must pay a substantial advance against future royalties. Mr. MacDermid, for example, is on the hook for $5,000 a year, even if he doesn't sell a single sign.

People producing Canal Street knockoffs also can create headaches.

“If you have the most basic silk-screening equipment, it's very easy to make an A-train T-shirt,” noted Ms. Lambert, whose business took a hit several years ago when a chain of stores began selling replicas of her shirts. Fortunately, the MTA went after the counterfeiters.

NO NONSENSE

As polite as the MTA's initial communiqués are, the agency takes licensing seriously. Faried Assad learned that after he opened a small bagel shop near the subway station at Smith and Ninth streets in Brooklyn. He and his partners named the store F-Line Bagels and decorated it with subway artifacts and custom-made replicas, including a large white “F” in an orange circle on the storefront.

The transportation agency pursued the matter legally, “after considerable effort on the part of the MTA to avoid the need for litigation,” says Mr. Heavey.

I decided to get someone to write my paper for money because of studying overload. The writers from this agency are indeed efficient and experienced! I loved the paper they have created. I am sure we will cooperate again soon.

Mr. Assad, who turned down a licensing deal that the MTA offered—”It's not going to sell us bagels,” he noted—ended up discarding more than $6,000 worth of subway-inspired decor. His advice to others: “Check first.”